The Small Business Doer

I’ve done my own set of books for over 10 years as well as have had others aid me in the process, whether hired help or family. In the past couple years I started doing bookkeeping for others and have learned a lot (mainly by trying to fix their problems :) !

I’ve got to say that the single, biggest issue that I’ve run into is not having enough information or knowing how to find the information. This theoretically shouldn’t be a big problem, to collect all the receipts, invoices, tax submissions and other financial information necessary to do the bookkeeping. That’s because any proper business entity you are dealing with usually (and yes, usually is the key word) gives you exactly what you need. The problem is that the people handling this information don’t know what to do with it. It gets lost, thrown out, left in the glove box of the car, recycled, you name it. It disappears. Sometimes it re-appears after a year or two after magically being found.

How do you get people who spend the business’ money, to collect the right info? You have owners, employees, family, friends, and all sorts of people who handle purchasing for many a small business. In bigger companies, they have dedicated staff to collect and track down this information. Who plays this role in the small business?

I think that in the end, it is the owner’s, or whoever the owner has in charge of the day-to-day operations, responsibility to make sure these receipts are collected. But what to collect and where to put it?

At the most basic form, for bookkeeping purposes, you need to collect any document that will show money going in to or out of your business’s accounts, whether it be a bank account, credit card, loan, line of credit. This also includes any monies that have been paid with non-business accounts, but are legitimate business expenses, such as:

• Expenses employees paid for and need a reimbursement for
• Any thing an owner paid for using a personal debit or credit card
• Any thing that was paid for using someone’s physical cash (dollar bills and coins)

More importantly, these documents should contain the following information:

• Business name of who you are buying from
• Date
• Total amount paid / payable
• Taxes Paid and the type of tax
• Description of what you bought
• PAYMENT METHOD (How was it paid for)!
• Business number
• Indication of which items are taxed and which are not
• Terms of Payment (immediate sale, 30 days to pay, etc…)
• Name of Buyer (you)

If you are in Canada, I have a post specifically about the Canadian government’s requirements on a business for issuing a receipt that gives more specific details on what you need to collect, as some details aren’t necessary for certain dollar amounts or services.

From a purely bookkeping / reconciling point of view, I bolded the most important information that needs to be gathered. I caps locked PAYMENT METHOD, because that has to be the biggest problem I have when entering receipts given to me. How in the world was this paid for.

In a truly perfect world, only business accounts would be used to purchase business items. This never happens 100% of the time. On a side note, bookkeeping is not about what works 90% of the time, it’s about what will work 100% of the time. If you are missing 10% of receipts for example, and you have 500 receipts in a year, that’s 50 transactions that you have no clue about. That’s going to be a lot of time wasted (which is money) as well as a lot of money that you won’t be able to claim as expenses (which will cost you money in more taxes paid).

How to Correct and Collect Documents

Above I mentioned that you are *usually* given the correct documentation. I also mentioned above that 90% is not good enough in bookkeeping. So, when you aren’t given the correct documentation – or given the documentation at all – here are some tips.

• Use only business bank accounts and credit cards. Not only is it easier to separate personal from business, it will be easier to locate what you are missing since you will have bank and credit card statements.
• When buying stuff with said debit and credit cards, get both the receipt / bill / invoice AND the transaction record for the debit card / credit card. Sometimes the receipt and transaction record are on the same documents, but more often than not the transaction record is on a separate piece of paper. You need both pieces of information, as one is proof of payment whereas the other is detailing the purchase
• When buying online, you are usually emailed a receipt (again, usually). Make sure to save that digital copy (I save it as a PDF). If you don’t know how to do this on a PC, you can print a document to a PDF file by using a free program called cutepdf. Mac’s have this feature built-in.
• When the online store you purchased from doesn’t issue a receipt, you can usually login to your online account a find a history of your transaction.
• If you use PayPal for online purchases, it usually gives you more information about your purchase than a credit card or bank statement.
• PayPal also can screw you up, as it can split your account into multiple currencies, and use a combination of funding types to pay for items (funds in your PayPal account, credit cards, bank accounts, and personal accounts).
• Please, please, please don’t use cash for International purchases. Figuring out the exchange rate for each day that you used cash to purchase something Internationally is a pain in the a**.
• Receipts fade or are already printed on with half-faded text. Right down on the receipt any information that is in danger of fading away.
• Anything that is issued to you digitally must be stored digitally (this is a Canadian rule, don’t know what the rule is in other countries). Don’t know how they would know whether it was issued digitally or not, but if you regularly print your digital receipts, you should also print them to PDF as well.
• Why are you printing anyways? You should keep all your records digitally. Not only does this make your receipts easier to find, it also backs up your documents (provided you are backing up your computer – which you should) in case of fire, theft, or other disasters.
• For any major purchases you make you can usually get a copy of the receipt if you lost it if you contact the company who you purchased it from.
• In Canada there are exceptions for items / businesses that you don’t usually get receipts from. You can find the Canadian exceptions to invoice requirements list here. These are things like paying a parking meter, taxi cabs, and coin machines (not slots!)
• Remember to get the part of agreement that shows amounts that are directly debited from your accounts. These are items such as insurance, loans, and subscriptions to name a few.